This review discusses the challenges and opportunities of German rural areas. This review states that Germany's current approach to rural development and rural policy is mainly sectoral and thus does not fully capture the diversity of rural regions. Neither does it foster the development of programmes that are adapted to each place.

Based on the experience of other OECD countries, a number of priorities for reform can be identified. The implementation of these reforms will require as a pre-condition the acknowledgement that, although appropriate at a certain moment in time, the present approach to rural policy needs profound modifications.

These modifications require building a broad consensus in order to overcome resistance that has long impeded change in rural policy in both Germany as well as in several other OECD countries. This consensus should be built progressively and through the diffusion of well-researched, objective information to both policy makers and broad sectors of civil society on the status and challenges of rural Germany.

Ultimately, the development of rural Germany is a matter of national concern, relevant for the future of both rural and urban citizens.

This report will be of interest to policy makers, researchers, NGOs and others active in rural development.

French and German translations of the Assessment and Recommendations have been included in this volume.

Chapter 1. Profile of Rural Germany

Key Points

According to the OECD definition of “predominantly rural” regions, Germany’s rural regions account for 29% of the surface area, 12% of the population and 9% of GDP. Using Germany’s classification of rural districts, a smaller unit of analysis, they account for 59% of the surface area, 27% of the population and 21% of GDP.

Population growth across rural regions is highly variable leading to increasing disparities in population density. In East German rural districts, this out-migration, especially of younger populations, compounded by the general ageing of the population is the most severe and is only expected to grow more acute in the future.

Rural regions lag behind other region types on several indicators of income, but that gap is stable to improving. The trend in GDP per capita by region type in Germany is comparable to findings within the OECD overall. Rural regions are at 80% of the national average for GDP per capita. East versus West Germany disparities in GDP per capita are striking for all region types. North versus South differences are also noticeable. As in most other OECD countries, a lower labour productivity (GDP per worker) is a main driver of a lower average GDP per capita. The differences in employment rate, as well as commuting, also explain this lower level performance in predominantly rural regions in Germany, more so than sectoral specialisation or the proportion of old residents.

Unemployment by region type varies between East and West Germany, but high skilled workers are generally lacking in rural areas throughout the country. Rural districts exhibit the highest rates of unemployment within East Germany, although in West Germany rural districts have lower unemployment relative to urban areas. The share of the labour force that is highly skilled is more than double in core cities than rural areas.

Approximately half of rural residents are living in a rural district in proximity to an agglomeration or urbanised area, providing opportunities for greater urban-rural linkages. In fact, 45% of rural residents live in districts where at least 50% of its municipalities are located within 30 minutes by car to a supra-regional centre.

While access to basic public services is assured throughout the country, the range of options is more limited in peripheral rural areas. The future sustainability of public services in some of these regions is of major concern, especially in East Germany. Of the rural population, 31% (6.9 million) lives in districts that are expected to have above average or high levels of public service sustainability problems in the future.

Agriculture plays a minor and declining role in rural regions, with a GVA of 2.9% and a 4.7% share of employment, albeit these statistics may understate the importance of backward and forward linkages.

Some rural regions are exhibiting economic dynamism even if many rural districts are among the poorest performing districts. While few East German districts experienced a growth in employment in 2003 as compared to 1995, in West Germany more than two in five rural districts did. In terms of firm starts, of the 20 top-ranked districts in 2004, seven are rural, albeit only one was from East Germany.

There exist opportunities for sustainable economic development in terms of both agriculture and non-agriculture land uses. There is a potential for exploiting new markets such as renewable energy, farm tourism, marketing of farm produce, maintenance of rural landscapes, and services for older populations, among others.

Chapter 2. Is There a Policy for RD in Germany?

Key Points

Despite the potential highlighted in chapter 1 for the diversification of the rural economy and the heterogeneity of its challenges, rural policy in Germany is mainly sectoral and focuses largely on agriculture. This approach reflects past conditions and is poorly adapted to the present characteristics of rural Germany.

As a result, the German approach to rural policy and its funding tend to complement EU agricultural policy rather than contributing to a national, strategic policy for rural development.

Regional policy developed under the Joint Task GRW is de facto, largely rural policy. Limitations derive from its remedial, top-down nature, as well as from a geographically limited scope (New Länders).

Germany’s regional development policy suffers from a growing urban bias which tends to overlook the development dynamics of rural areas. The disconnect between a regional, urban-focused policy, and a weak rural policy raises concerns in terms of the government capacity to cope with rural-urban linkages.

The governance of rural policy is hampered by difficulties in terms of horizontal co-ordination of public and private actors involved in rural policy as well as in terms of co-ordination mechanisms through different tiers of government. The ‘cost of non-coordination’ is high both in terms of efficiency and effectiveness of public spending in rural regions.

At the central level there is a need for a clearer legal framework for rural policy as well as a widely recognised leadership in this field. Also there is no evidence of effective ‘rural-proofing’ of sectoral policy (such as environmental, education or health policy) impacting on rural areas.

Innovative, place-based programmes(Regionen Aktiv, LEADER) meet a demand for innovation and participation at the local level and have positive results in terms of dynamising local economies and institutions. However, these programs are still ‘niche’ and being strongly under funded are unable to produce significant impacts.

Chapter 3. Towards a Modern Rural Policy for Germany

Key Points and Recommendations

Develop capacity to monitor and assess both 1) trends in rural areas and 2) impact of rural, regional and sectoral policy by filling research gaps and strengthening analytical capacity and information sharing within federal and Länder governments.

Develop a coherent, widely shared vision for German rural areas. This vision should account for several internal and external factors influencing Germany’s rural economy. Also it should proceed from a wide range of actors representing both rural and urban concerns, as well as consumers, environmental groups, farm and non-farm industries and other organised and less-organised stakeholders of rural development.

Address cross-cutting determinants of rural competitiveness. In particular, two priorities areas are identified which are key to the development of rural areas in Germany: 1) fostering business development and innovation through the provision of public goods and territorially targeted education and training policies. 2) addressing the emerging strain in service delivery especially in East Germany’s rural areas and ensure the economic sustainability of such services by modernising delivery in the key sectors of health and education.

Increase support to investments versus subsidies in sectors (such as amenity-based tourism, Mittelstands, energy production and services to the elderly) bearing potential given internal and international trends.

At the central level, 1) consider the establishment of a new legal framework for rural policy design following recent examples from other OECD countries. 2) consider the rationalisation of responsibilities over rural issues in terms of identifying a stronger leadership, better co-ordination and reduced asymmetries with Länder administrative structures. 3) introduce rural-proofing mechanisms of sectoral policies as well as of regional and urban policies.

Improve existing vertical coordination mechanisms in regional and rural policy and enlarge the scope of GAK towards explicit rural development objectives. Strengthen monitoring and evaluation and introduce performance reserves and incentives for increased local planning and cooperation. Consider merging the two Joint Tasks GRW and GAK into one single framework for regional policy.

At the intermediate and local levels, foster the integration of sectoral programs, strengthen technical assistance and capacity of public and private actors in strategic, integrated planning. Promote cross-fertilization and local actors interaction nationally and internationally.

Consider increasing funding and geographical reach of integrated, place-based programmes such as “Regionen Aktiv”. Most importantly, advance in mainstreaming these approaches as a mean to increase cross-sectoral coherence and broader participation to rural policy design and implementation.

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